Building Trust with the Board of Directors


Governance is a collaborative effort. A productive collaboration relies on trust among team members and building this trust is critical to the Board’s ultimate success. Board members – as team members – must be able to rely on each other openly and without reservation. The chair, individual board members and the board as a body must develop a trusting relationship with each other and with the Chief Executive Officer (CEO) to consolidate mutual efforts and objectives. No single relationship in the organisation is as important as that between the board, its CEO and top management.

Today most new CEOs encounter big surprises after assuming the top job. Many are overwhelmed by the sheer demand on their time and how many balls they must juggle at once. The past couple of years have only made things harder for new CEOs, with the business environment the worst since the Great Depression and with a whole new, very powerful constituency to manage – the government. With boards continuing to ramp up their scrutiny and oversight of management, CEOs and other executive office bearers need more than ever to focus on relationship building with boards.

Why Trust Between Boards and Staff?

Trust is the fundamental quality of successful, productive and sustainable relationships. Cooperation is a vital sign of corporate health. Conflict can cost you a loss of trust, wasted time, withholding of information, undermining, boundary issues, collusion, underperforming board or CEO and ultimately lower return to shareholders.

The following shows the differences between two organisations, one with high degrees of fear and distrust versus one where the culture is built on a foundation of trust.

Culture of Distrust and Fear

Culture Built on Trust

Minimal Collaboration

High Levels of Collaboration

Turf Battles

Open Sharing of Information

Low Morale

High Morale

Negative Gossip

Positive Gossip

Ridicule

Respect

Low Levels of Innovation

High Levels of Innovation

Crisis

Anticipation

Sabotage/Behind the Back Gossip

Disciplined Communications

As one looks over the left-hand column there is an air of familiarity about it. Sad to say, many of the behaviours in the left hand column are all too common in the realm of board/staff relationships.

What is Trust?

No trusting relationship is one dimensional, particularly not the Board/CEO relationship…it is a dual relationship – one party is trustworthy, the other trusts. Trust is personal, not institutional; it’s emotional, not just rational. Above all, it has to do with the organisations’s intent. Trust is an expectation based upon a fundamental human need: safety.

When I say I trust you, I am really saying that I trust that you will behave in a way which I expect, and that way will be in my interest.

In other words, I believe, based upon my experience, that you will not hurt me. I am convinced that you will act in my best interest whether I am present or not. Another expert, Charles Green, points out that the following four components are a required to build trust:

  • Credibility has to do with the words we speak – are we believable?
  • Reliability has to do with the actions we take – are we dependable?
  • Intimacy has to do with the safety of discussions – am I discrete?
  • Self- Orientation has to do with attention, on whom is my attention focused? The more you focus on your own self-interest the lower the level of trust.

In short, when trust is present, everyone is driven by a common goal and shares information openly, accepting positive interdependence. Clearly, the building of mutual, balanced trust must be the key philosophy of a board, CEO and executive staff.

How do you build a strong relationship with your board?

1. Establish the parameters of your authority.

The board is a group of people with often diverse backgrounds. They come together six or more times a year to participate actively in governing the companies they serve, to provide oversight to corporate leadership and to protect and enhance shareholder value. Although they have tremendous influence, they often have only moderate knowledge of the company. They are typically busy people who balance numerous competing commitments – to work, family, charities and other boards – and they have finite time to devote to any one board they serve on.

This is not to say they don’t take their roles seriously. Most directors do. It is also not to say they will come unprepared. Most will not. It is to say that they represent a unique constituency for the CEO, one that takes a focused effort to lead and manage effectively.

CEOs must establish the parameters of the playing field and of the players on the field. Delineate what your role is, what the board’s role is and how the two roles differ from, yet depend on, each other. Clarify what you believe your authority will be and what the board believes it will be. With the board’s input, put these descriptions in writing, establishing the working relationship and rules of engagement you will have with your board.

2. Show empathy.

Empathy enables one to establish trust and connection with others necessary for mutual interaction and full comprehension of the experience. What is empathy? It is an emotional process that builds connection between persons. It is a state of perceiving and relating to another person’s feelings and needs without the need to blame, give advice or fix the situation.

Empathy also means “reading” another person’s inner state and interpreting it into understandable conversation which supports mutual trust. To show empathy is to identify with another’s feelings. It is to emotionally put yourself in the place of another.

It is an intuitive act wherein one gives complete attention to someone else’s experience in order to make the other fully comprehend the essence of the said experience. To be empathetic is make another person feel secure to open up and share his experience. To be empathetic makes the person feel not entirely alone in his predicament or a stranger in the environment he revolves in. The ability to empathize is directly dependent on your ability to feel your own feelings and identify them.

3. Understand your board’s spoken – and unspoken – power dynamics.

The boardroom is a highly nuanced, very human environment. People often make subtle points in ways that require the CEO to truly listen. The more you invest in building relationships with board members, the more you will understand the subtext that underlies what is said.

Make it your mission to get to know each board member personally, as early as you can if you are a new CEO. Take time to understand what makes board members tick, what is important to them and what specific talents and value each brings to the board. How does each member perceive the company and the board’s role in governing it? How is each likely to vote on key issues, given his or her point of view?

Determine the formal relationship you will maintain with the board in meetings and the structure you will use to get things done.

Consider also your informal relationships with individual board members, developed through phone, e-mail and in-person communications. These interactions are equally important for building trust and influence. Understand the difference between interactions outside and inside the boardroom. For example, you can make calls in advance to obtain board members’ support, yet once the directors are together, the mood can change. Be prepared for such a shift.

Along with the formal leader of the group, identify who the informal leader is, if there is one, and understand the leadership style of both of these people. Determine if there is a board inside the board – a core group of influencers who have particular power. If there is, understand its agenda and work to build rapport.

4. Avoid hasty change.

New CEOs often work in ways vastly different from their predecessors. They may reject altogether the way their predecessors did things, swinging the pendulum all the way in the opposite direction as they reject the past in order to lead into the future. Whether or not what was done before was effective, remember that board members and other stakeholders are likely very used to it. By taking an abrupt sharp turn you can create a sense of paralysis.

Take time to transition. Don’t just assume alignment will happen. The board’s members don’t yet know what you can do; they only know what the previous CEO did, which they either liked or disliked. Allow time for getting acquainted and gelling as a cohesive group. And avoid trying to show how different you are from your predecessor.

If your way of doing things is markedly unlike the previous CEO’s, you may need to take a compromise approach at first that lets the board get comfortable and confident with your new way of interacting. For example, the former CEO might have brought the senior leadership team to every meeting; you might prefer to involve them in every other meeting, so that you can have more intimate interactions with the board, or you may want to bring them even less than that. You may also want to change the content of the board agenda. When the directors are used to a certain approach, such things are best done slowly, without too much drastic change (unless, of course, things are completely broken).

5. Act as a leader, not an autocrat.

Many CEOs struggle with leading the board. They try to lead it the same way that they lead the company – laying it on the line and moving on. That doesn’t work in the boardroom. In fact, it can be perceived as arrogance and autocracy, eroding trust and breaking down the relationship.

Seek to be humble and keep your ego at bay. Be mindful always that the board and the shareholders are who you work for. Lead and get out of the way, letting the board reach consensus on its own when it needs to. Rather than forcing outcomes, manage to them. This may require you to expand your leadership range and demonstrate a higher degree of personal agility and diplomacy.

In making and executing decisions, be inclusive and open to different points of view. Instead of presenting one idea for discussion, offer several scenarios and options along with your recommendations – and state the business case for why. Be open to learning, and show your willingness to act on board members’ feedback. Rather than seeking recognition show recognition. Be authentic by walking the talk. Honour your promises.

6. Be transparent.

The corporate world has become very open and there really is no place to hide anymore. The government, employee and public demand for transparency in the boardroom is simply too great. There is a huge trend toward increased transparency in new legislation, in the whole area of proxy access. Embracing your board and creating a transparent and open environment one is critical.

Indeed, an effective relationship with the board requires transparency in every interaction. You must tell it like it is and keep the board apprised of key happenings so there are no surprises. Communicate clearly, promptly and completely. If the board asks the wrong question, say so and bring the right one to the table rather than simply responding to what was asked. Talk about both what your company is doing right and what it is doing wrong, along with your plans to address the latter.

Develop a sound approach for board interaction that recognises the board’s responsibility for routine business and overall leadership. Ensure that board members are well-informed and have the information they need, both during meetings and in between them. Simplify the issues so that everyone is on common ground in discussing key topics. Any board member should have input into the agenda if he or she has a hot button issue to address or discuss at the full board meeting.

Board meetings themselves are, of course, the most important testing ground for establishing how directors view the CEO, so it is critical to bring a spirit of openness to them. Remember that asking questions is a key part of the board’s job and create an environment that is conducive to honest inquiry. Don’t get defensive and don’t try to answer questions too quickly. That can make board members feel inadequate and in turn shut down the questioning process. Be thoughtful about your answers rather than measuring your effectiveness by the speed of them. Many CEOs think they need to answer every question even when they don’t really know the answer. In essence, they wing it. Don’t do that. Most board members will see right through it, diluting your effectiveness and the trust you need to establish.

Just as you invest in your employees, customers and shareholders, you must determine how you will invest in this new board constituency – and how it will define your success.

7. Develop and invoke a set of ground rules.

Ground rules are a way to clarify and codify the answer to the following four questions:

• How do you want to be treated?

• How do you think you should treat others?

• How do others think you want to be treated?

• How will we resolve conflicts?

Unfortunately, most organisations have no ground rules to guide the relationship between board and staff. And those with ground rules seem to pay them lip service. If people in an organisation cannot answer the four questions above, they will be seriously constrained in the ability to achieve levels of performance.

Conclusion

It is important to expose top management to the board. Ensuring that top management meets with the board on a regular basis is one of the best ways of building trust as they can share information and challenges. Moreover, they learn about each other as individuals rather than knowing each other as office bearers and directors only. Trust is a perpetual process that must be continually renewed among people and within organisations. With this mind, an executive director should have a game plan each year designed to build and maintain trust between the board and staff. Fortunately the ability to build, extend and restore trust can be learned. Focus on relationship-building from the start!

Copyright 2010 by Karl Smith

This article may be copied or republished with the following credit:
“By Karl Smith, founder of Business Networking South Africa, +27 (0) 071 444 2210 karl@businessnetworkingsouthafrica.co.za “ www@businessnetworkingsouthafrica.co.za

Book Karl to motivate your team or to help them to build internal and external business relationships now!

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